Third Circuit Chides SEC For Terse Refusal To Engage In Crypto Rulemaking

On Jan. 13, 2025, a unanimous panel of the U.S. Court of Appeals for the Third Circuit held that the Securities and Exchange Commission (SEC or the Commission) violated the Administrative Procedure Act (APA) when it offered only a one-paragraph explanation for its refusal "to promulgate rules clarifying how and when the federal securities laws apply to digital assets like cryptocurrencies and tokens." Coinbase, Inc. v. SEC, No. 23-3202, 2025 WL 78330, at *1 (3d Cir. Jan. 13, 2025) (Ambro, J.). Although the panel stopped short of ordering the SEC to grant a rulemaking petition that had been made by Coinbase Global — and instead remanded to the agency for a more reasoned explanation of its refusal — a concurring opinion by Judge Stephanos Bibas stated that the SEC's decision to regulate crypto only through enforcement actions and adjudications deprived crypto companies, like Coinbase, of constitutional fair notice. Id. at *20 – *29 (Bibas, J., concurring).